Minnesota attorney general wants to end utilities' automatic temporary rate hikes

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Minnesota Attorney General Lori Swanson, joined by Representative Debra Hilstrom and Senator Chris Eaton, renewed her call from three years ago for legislation that would end automatic interim rate hikes by public utilities, putting Minnesota in line with about 18 other states.

Swanson said that in the last five years, Minnesota customers paid about $177 million in automatic temporary rates that were eventually refunded after the Minnesota Public Utilities Commission (“PUC”) conducted full rate hearings.

“Minnesota consumers should not be a bank for utilities. Rate hikes should not be automatic, even temporarily,” said Swanson.

Since 2008, public utilities in Minnesota have collected about $525 million through temporary rate hikes. The final rate increases approved by the PUC after full examination of the utilities’ requests, however, were about $348 million, meaning that about $177 million was refunded to Minnesota consumers because the interim rates exceeded the final rates. In other words, utilities collected about $177 million more than they were able to prove up.

The rate hikes come at a time that many people are trying to keep up with everyday bills, Swanson said. According to the U.S. Census Bureau, over the last decade, median household income has decreased from $53,646 to $50,054, while during the same period, the Annual Consumer Price Index rose from 260.2 to 330.3, an increase of nearly 27 percent.

Under current Minnesota law, a utility has the burden of proving that a requested permanent rate increase is just and reasonable. The rate hearing process generally takes about 10 to 14 months. Minnesota law currently provides that when a utility makes a rate hike request, the PUC shall allow the utility to increase rates on an interim (temporary) basis—without any hearing—unless “exigent circumstances” exist. In other words, current law allows a utility that files a request for a rate increase to put the new rates in place immediately, Swanson said. If the PUC ultimately does not allow the full rate hike, the utility must refund any interim charges (with interest) to the customers.

“In these times when many Minnesotans are struggling financially, customers have paid millions of dollars in temporary rates that were ultimately refunded. This proposed bill brings common sense reforms applied in other states to the rate process in Minnesota,” said Rep. Debra Hilstrom, Chair of the House Judiciary Committee and lead author of the 2010 bill.

“It’s only fair that utilities should have to prove they need an increase before automatically applying any temporary rate hike on consumers,” said Senator Chris Eaton.

The proposed legislation, which Swanson first pushed in 2010, would alter current law by making interim rate increases the exception not the rule. The bill would create a presumption that no interim rate increase may be allowed unless the PUC makes a finding that an “immediate and compelling necessity” exists to make it unreasonable to await the normal regulatory process to impose an interim rate hike. The legislation would bring Minnesota in line with the laws and practices of at least 18 other states that make interim rate hikes the exception not the rule, including Alaska, Indiana, Missouri, New Jersey, New York, Ohio, Tennessee, Texas, Utah, Florida, Hawaii, Arizona, Colorado, Idaho, Connecticut, California, Oregon, and New Mexico.

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